Homeowners Rent Out Rooms to Stave Off Foreclosure

Reeling from the recession’s one-two-three-punch of job woes,
climbing mortgage payments and evaporating equity, desperate homeowners
are dipping into a nearby income stream to avoid foreclosure.

That bedroom just down the hall.

While renting out a room has been around for years, especially in the California’s
Latino neighborhoods, sharing a home in order to save it has become an
increasingly popular way to hang on to the front-door keys to the
American dream.

“I’m up against a wall and I had no other place to turn for income,” said Rafael Porras, a 50-year-old waiter who began renting out a room in his downtown San Jose
condo this month after he was squeezed by pay cuts at work and a
mortgage payment about to rise. “But I had to do it because I don’t
want to walk away from this place. “

Whether they’ve rented out rooms in the past to make
ends meet, or a job loss has prompted them to tap into their inner
landlord for the first time, many people say their rental income is the
only thing keeping them from losing their homes. And for many
homeowners ? even those whose property is worth less than their loan
amount ? losing their home is not an acceptable option.

“I can’t imagine life anywhere else,” said 71-year-old Margaret Licon, who bought her San Jose
house 40 years ago and raised six kids in it before losing her husband
25 years ago. With no job, dwindling savings, and rising loan payments,
Licon now relies on a houseful of renters to stay afloat ? a couple
with three kids, an ex-Marine with health problems, and two grandsons
shoe-horned into the garage.

“Without my tenants, I couldn’t make it,” said Licon, who’s hoping her lender will modify her $400,000
loan. “But I’ve been here so long, this house is a part of me. I’d even
move into my garage and rent out my own bedroom if it meant keeping my
home.”

While it’s hard to know precisely how many
struggling homeowners have turned to renting out rooms, housing
advocates have seen a surge in the past year in the number of people
desperate enough to give it a try. Especially among the recently
unemployed, rental income ? along with family loans ? has become a
godsend.

“Renting out bedrooms is a growing trend,” says Sunnyvale, Calif., housing counselor Maritza Wong, who works for the nonprofit Project Sentinel. “And it’s not just lower-income people doing it, but even people who were making good money before losing their jobs.”

At Project Sentinel, where staffers
report as many as 20 percent of their clients becoming landlords under
their own roof, counselors are recommending the practice as a way for
homeowners to tweak their debt-to-income ratio in order to qualify for
a modification.

But a word of caution: becoming a landlord,
especially for someone with little or no experience, can bring
headaches, from tenants who fail to pay rent to those who are just a
pain in the neck to live with.

Before finding his current tenant this month, Porras
took in a roommate last year, “but I didn’t like it because he was
messy. He was watching too much TV. I couldn’t even change the channels
in my own house.”

The situation became untenable, said Porras, because
“he took over the place, sleeping in the living room. I had to force
him to leave because we were arguing so much. It didn’t turn out well.”

Often, it’s family members moving in together for shelter from the recession. Patty Guertler with Surepath Financial Solutions in San Jose,
a center that offers credit and foreclosure counseling, says often it’s
“adult sons and daughters moving back in with their parents who are
facing a financial crisis. It’s always been fairly typical in the
Latino population to keep the family circle close, but now the
recession has made it even more dramatic.”

And all that drama can spell trouble. For Milpitas, Calif., homeowner Charles Jackson, sharing some of his most intimate space with three non-family tenants is both a necessity ? he’s living mostly on Social Security
and trying to keep up with a mortgage that’s mushroomed because of
refinancing ? and a challenge. He’s renting to a couple, who keep to
themselves, and a neighbor who needed a room after the house he was
living in went into foreclosure.

Jackson and his roommate, Frank Marquez,
are still learning the delicate art of sharing an 1,100-square-foot
home. “We’ve only got one bathroom that we share, so we both got gym
memberships to take some of the pressure off. And I’ve had to set up
rules for him so we’d get along.

“Laundry, for example, became an issue,” says
Jackson. “Frankie works in a body shop and he didn’t realize that when
you wash something really dirty, like his uniform, it leaves a ring. So
he’s lost his washing privileges. ‘Go the Laundromat,’ I told him. ‘You
might meet a nice lady.'”